According to research by Ernst & Young LLP, the global consulting firm, as the Covid crisis recedes, supply chain executives are losing the strategic gains they made with their C-suite counterparts. During and immediately after the pandemic, supply chain leaders were in an unfamiliar position: they had the attention of top management and a once-in-a-generation opportunity to make their supply chains more agile and resilient. The EY research suggests that at many companies, that opportunity is receding.
While 87% of supply chain leaders say their organization has made significant investments to improve supply chain resiliency, 19% admit that today they are unprepared to face supply chain disruptions due to supply shortages. “To improve,” the report rightly notes, “organizations should enhance supply chain visibility with robust data and analytics; use AI to foresee disruptions; keep business continuity plans current; and diversify supply sources, suppliers, manufacturing and logistics partners.”
Further, while 88% of supply chain executives report that their organization’s supply chain plays a vital role in enhancing the customer experience, their colleagues in the C-suite overwhelmingly (88%) view the supply chain function as a cost center. Despite a heightened awareness of the importance of supply chains, 78% of supply chain leaders say their organization is back to focusing on supply chain cost management. 28% of supply chain leaders cite cost reduction as one of the top three priorities currently. This is a clear shift from pandemic-era strategies when agility and resilience were priorities.
88% of supply chain leaders say their supply chain has a vital role in enhancing the customer experience by promptly addressing customer needs. Only 76% of the C-suite see it the same way. Agility and resilience play a key role in customer satisfaction. Prepandemic research by the McKinsey Global Institute found that, on average, companies experience a disruption of one to two months in duration every 3.7 years.
While supply chain executives largely realize how critical collaboration and effective supply chain technology are. Supply chain executives tout the necessity of internal collaboration for resiliency (64%), revenue generation (62%), and customer satisfaction (63%). With supply chain management’s historic focus on breaking down silos, it is surprising that those numbers are not significantly higher.
In contrast, on achieving objectives like resilience, revenue generation, and customer satisfaction, the C-suite scores are 14-19% lower on the necessity of internal collaboration.
When it comes to the importance of external collaboration’s positive contribution to resilience, revenue generation, and customer satisfaction, the gaps are even bigger. 74% of supply chain executives say external collaboration contributes to resilience. Only 59% in the C-suite say the same. The comparative numbers for supply chain leaders vs. C-suite leaders for revenue generation (67 vs. 56%) and customer satisfaction (70 to 55%) are similar. There appears to be an expectation on the part of many C-suite leaders that the necessary collaboration is taking place.
What gets measured affects what gets prioritized. Yet in EY’s research, they report that “nearly all supply chain leaders (97%) say that their organizations are currently facing challenges as it relates to supply chain metrics and that challenges come from a lack of integrated data and cross-functional metrics being in conflict with each other, among others. Supply chain leaders’ performance is currently focused on key performance indicators such as rates of return (49%), cash-to-cash cycles (46%), and supply chain costs as a percentage of sales (45%). Ideally, supply chain metrics would also reflect customer satisfaction, revenue growth, and market share.
The survey indicates “that 84% of supply chain leaders say they are more focused on internal operations than customer needs, with 76% indicating they prioritize making new and innovative products over creating the best customer experience. In fact, only 44% of supply chain leaders report tracking customer satisfaction (e.g., net promoter score or similar metric) as a supply chain KPI. Yet, customer satisfaction depends upon reliable and timely deliveries. In the long term, satisfied customers – as measured by NPI scores in excess of key competitors – buy more, which leads to increases in a company’s market share.
For this research, 347 US supply chain leaders from different industries were surveyed. Those companies had at least $500 million in annual revenue. The margin of error for the total sample, conducted this spring, was plus or minus 5 percentage points at the 95% confidence interval.
